(FIRST) HUGO MARK RICHARD LUMSDEN AND (SECOND) KATHERINE DIANA LUMSDEN OR LING AGAINST RUPERT EDWARD CHARLES LUMSDEN
OUTER HOUSE, COURT OF SESSION
[2016] CSOH 53
A116/16
OPINION OF LORD PENTLAND
In the cause
(FIRST) HUGO MARK RICHARD LUMSDEN and
(SECOND) KATHERINE DIANA LUMSDEN or LING
Pursuers;
against
RUPERT EDWARD CHARLES LUMSDEN
Defender:
Pursuers: Sandison QC, Watt; Shepherd & Wedderburn LLP
Defender: Kinroy QC; Blackadders LLP
14 April 2016
Introduction
[1] Captain Kenneth Ian Hugh Lumsden (“the testator”) died on 31 March 2008. The first pursuer is the testator’s younger son. The second pursuer is his daughter. The defender is the testator’s elder son.
[2] Under and in terms of his probative will dated 21 March 2008 (“the will”) the testator appointed his widow, the defender, the first pursuer and Mr Peter Manson Robertson, solicitor as his executors and conveyed to them mortis causa in trust his whole means and estate wherever situated at the time of his death for the purposes set out in the will. The executors were duly confirmed and entered into office. The total estate for confirmation was valued at £9,101,978.18, of which the residue of the estate of Banchory Devenick was valued at £3,360,646. In this opinion I shall usually refer to the residue of the estate of Banchory Devenick simply as “the estate”. The estate is located on the south westerly outskirts of Aberdeen.
The material terms of the will and codicil
[3] By Clause (FOURTH) of the will the deceased’s executors were, so far as material, instructed to:
“ … pay and make over the residue of Banchory Devenick Estate to my son, the said Rupert Edward Charles Lumsden with the exception of:-
(One) the potential development site at Leggart situated between the end of Leggart Terrance/Leggart Crescent and the Den of Leggart the title to which should be held by the said Rupert Edward Charles Lumsden, Hugo Mark Richard Lumsden and Peter Manson Robertson as Trustees for behoof of the undernoted beneficiaries in the following proportions:-
(a) 30% share to the said Rupert Edward Charles Lumsden;
(b) 30% share to the said Hugo Mark Richard Lumsden;
(c) 30% share to the said Katherine Diana Lumsden;
(d) 10% share to the said Nicolette Diana Graham Lumsden;
(Two) the new woodland plantation at Charleston which forms the southern boundary of Banchory Devenick Estate lying to the south of the CK5 public road the title to which shall be held by the said Rupert Edward Charles Lumsden, Hugo Mark Richard Lumsden and Peter Manson Robertson as Trustees for behoof of the undernoted beneficiaries in the following proportions:-
(a) one-third share to the said Rupert Edward Charles Lumsden;
(b) one-third share to the said Hugo Mark Richard Lumsden;
(c) one-third share to the said Katherine Diana Lumsden; and
(Three) Woodside Farmhouse and steading and Tillyhowes Farmhouse, the title to which shall be held by Rupert Edward Charles Lumsden, Hugo Mark Richard Lumsden and Peter Manson Robertson as Trustees for behoof of the undernoted beneficiaries in the following proportions:-
(a) one-third share to the said Rupert Edward Charles Lumsden;
(b) one-third share to the said Hugo Mark Richard Lumsden;
(c) one-third share to the said Katherine Diana Lumsden
Declaring that the said Rupert Edward Charles Lumsden is to drive both potential development sites forward in a proactive way for which efforts he will receive a remuneration to be agreed by my Executors at the time;”.
[4] By probative codicil, dated 22 March 2008, in the form of a letter addressed to Mr Robertson (“the codicil”) the testator altered the terms of the will. So far as material the codicil stated:
“DEAR PETER
THANK YOU FOR YOUR LETTER OF 17TH MARCH 2008. THE WILL IS NEARLY RIGHT, BUT NOT QUITE:-
(FOURTH)
(ONE) NO NEED FOR A TRUST
(TWO) NO NEED FOR A TRUST
(THREE) MAY BE REMOVED ON THE UNDERSTANDING THAT (FOURTH) ANY DEVELOPMENT GRANTED PERMISSION ON ANY PART OF THE ESTATE IS EQUALLY DIVIDED THREE WAYS BETWEEN MY CHILDREN
(SEVENTH) ….”
The pursuers’ pleaded case
[5] The pursuers contend that, properly construed, the will and the codicil obliged the testator’s executors to make such arrangements as were necessary, on the conveyance to the defender of the title to the estate, to render that title subject to a condition that the pursuers were to be entitled to share equally with the defender any profits to be made out of the future development of any part of the estate. It is averred in the summons (article 7) that such an arrangement could, for example, have taken the form of a suitably worded personal obligation undertaken by the defender to the pursuers and secured by a standard security over the estate.
[6] The pursuers go on to aver that notwithstanding what they contend to have been the clear terms of the codicil and in breach of their fiduciary obligations as such, the testator’s executors effected by means of a disposition in 2009 (recorded in 2010) a conveyance of the estate to the defender without any such arrangement as was required by the codicil. In these circumstances, the pursuers maintain that the defender took title to the estate in actual or constructive knowledge that the conveyance to him of that title, unfenced by any such arrangement, constituted a breach of trust on the part of the executors. Accordingly, or so the pursuers aver, the defender’s title is impressed with a constructive trust obliging him to give effect to the condition which the executors ought expressly to have imposed upon that title. The pursuers allege that any future conveyance by the defender of any part of the estate without his making the type of arrangements referred to in the summons would amount to a further breach of trust on his part.
[7] The pursuers go on to aver that the defender has been negotiating to sell the estate to a company known as Apardion B&L Investments Limited (“Apardion”). The pursuers aver that Apardion was incorporated on 21 December 2015 with its registered office in London. It is averred that negotiations for the sale have been underway since at least December 2015. The pursuers say that they have been given no assurances by or on behalf of the defender that the title to the estate which he proposes to confer on Apardion will be made subject, as it ought to be, to arrangements giving effect to the condition on which they rely and which they say ought to attend the title. The pursuers apprehend that the defender will, unless interdicted, convey the estate to a third party free of arrangements giving effect to the condition which ought to attend the title to the estate. The pursuers say that were this to happen they would be deprived of any assured means of obtaining that share of any profit to be derived from future development of any part of the estate to which their late father’s testamentary writings entitle them.
Procedure in the action to date
[8] Interim interdict was granted, before calling, on 1 April 2016. Despite having lodged a caveat, the defender did not appear and was not represented at that hearing. I understand that the order was, in effect, granted of consent as a short-term measure pending the defender having an opportunity to consider matters more fully. I note from the minute of proceedings that the Lord Ordinary expressed the view that it would have been preferable for matters to have been regulated by means of an undertaking. The pursuers’ motion for interim interdict was continued until 5 April 2016.
[9] On 5 April 2016 the interim interdict was re-imposed, the interlocutor providing that this was done on the pursuers’ continued motion and of consent. The interlocutor went on to state that this was done until further orders of the court.
[10] The case came before me during recess on 8 April 2016 when parties were each represented by senior counsel. Neither side had enrolled any motion, but it was agreed that I should treat the matter as an application for interim interdict de novo. At the outset of the hearing Mr Kinroy QC tendered on behalf of the defender a set of draft defences; I found these to be of assistance as a summary of the defender’s position. Mr Sandison QC for the pursuers submitted a paper, which he described as a speaking note, setting out a helpful summary of his submissions.
Summary of the parties’ submissions at the hearing
Pursuers
[11] Mr Sandison submitted that the averments in the summons disclosed a strong prima facie case; he characterised this at a later stage of his submissions as a good going argument. Under reference to the decision of the Supreme Court in Marley v Rawlings [2015] AC 129, counsel submitted that wills were now to be construed in the same way as commercial contracts. The aim was to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context (Lord Neuberger paragraph 20). There had never been, in the words of Lord Hoffman in Kirin-Amgen Inc v Hoescht Marion Rousell Ltd [2005] 1 All ER 667, paragraph 64, an acontextual statement made by anyone. However meagre an utterance might be, it always possessed some context. In the circumstances of the present case the relevant context was, according to Mr Sandison, that the testator wished to convey the family estate at Banchory Devenick to his elder son in line with family tradition. This was to take place subject to the exceptions carved out in clause (fourth) of the will. By the codicil the testator removed the requirement that there should be a trust in the case of the first two exceptions and he deleted the third exception altogether. The removal of the third exception had the effect of restoring Woodside and Tillyhowes to the residue of the estate bequeathed to the defender. These amendments (particularly the deletion of the third exception) were made by the testator on the express understanding, expressed as such, that his three children were to share equally in the profits generated by any development on any part of the estate. As Mr Sandison put the point, it could be taken that Captain Lumsden was a believer in primogeniture as a means of keeping the family estate together, but he could see no reason why, if the defender chose to develop the estate, involving the sale of part or parts of it to third parties for profit, the proceeds of that course of action should not have to be shared equally with his siblings. Counsel submitted that the language of the stipulation was not expressed merely as a wish or desire. It was (or at least arguably was) to be read as a condition of the bequest conferred on the defender. Under reference to Lord Sorn’s opinion in Veitch’s Exr v Veitch 1947 SLT 17, counsel observed that a condition attached to a bequest fell to be given effect even though there might prove to be difficulties when it had to be applied. Mr Sandison argued that the testator’s use of the word “understanding” was important. An understanding meant more than a mere expression of hope, or so counsel submitted.
[12] Mr Sandison went on to contend that the testamentary trustees (including the pursuer who had not had the benefit of independent legal advice at the time) conveyed the estate to the defender without taking any steps to honour or apply the condition stipulated in the codicil. This amounted to a breach of trust. In these circumstances, a constructive trust had arisen requiring the defender to give effect to the condition which the testamentary trustees ought expressly to have imposed on the title. Any future conveyance by the defender of the estate without such a condition being imposed on the new owner would constitute a breach of the constructive trust.
[13] Mr Sandison explained that the first pursuer, in particular, had been concerned for some years about the failure to recognise the binding effect of the stipulation in the codicil. It became apparent in 2015 that the defender was proposing to sell the estate. The first pursuer had complained to the Scottish Legal Complaints Commission (“the SLCC”) about a number of aspects of the handling of the executry by the solicitor executor, Mr Robertson and the firm in which he was previously a partner. These complaints included an alleged failure to make provision for payment to the first pursuer of development profits. The SLCC had decided not to uphold this particular ground of complaint on the basis that questions of interpretation of the will were not for it, but were matters for the court. Following this decision the first pursuer consulted counsel and the present proceedings were raised. The pursuers had now become aware that the defender had entered into missives for the sale of the estate to Apardion, a company with a share capital of £1,000. The pursuers understood that there were two directors of that company, both of whom gave accommodation addresses in Charleston, South Carolina; they were understood to be involved in the venture capital business. The company’s agents had refused to provide details of its shareholders on the basis that the pursuers did not have a sufficient justification for being given that information. The terms of the missives had not been disclosed to the pursuers on the ground that they were confidential. The sale price was understood to be in the region of £8,500,000. A good deal of uncertainty surrounded the terms of the contract and its purpose. It was, said Mr Sandison, shrouded in mystery.
[14] In these circumstances, Mr Sandison submitted that the pursuers had shown that they have a prima facie case for interim interdict against the defender from completing a conveyance to Apardion or its nominee or from agreeing to sell the estate to anyone else. A transfer of title away from the defender to a party not subject to fiduciary duties to the pursuer would downgrade the pursuers’ claim from one which ought to attend the title to the estate to one of a wholly different and inferior character, namely a personal claim valid against only the defender. If interdict were to be granted, the defender would remain free to dispose of the estate, but in doing so he would have to ensure that the terms of the disposal recognised the pursuers’ rights to share in any future development profits.
[15] As to the balance of convenience, Mr Sandison submitted that this favoured the grant of interim interdict. The pursuers had a strong prima facie case. The status quo should be preserved. The pursuers should not be placed in a position whereby they were left with an unsecured claim for development profits enforceable at some future unknown date when the defender’s ability to satisfy the claim will be uncertain and the information to calculate it might be difficult to obtain; the pursuers’ rights should not be reduced in this way so that they became a thing writ merely in water, as Mr Sandison put it. The pursuers could not be said to have delayed unreasonably in seeking interim interdict, especially in the context of a dispute amongst family members. The present action had been raised with reasonable expedition after seeking counsel’s advice. The pursuers had not been aware at the time of raising the action that missives had been concluded.
Defender
[16] Mr Kinroy QC for the defender submitted that the pursuers did not have a prima facie case or at least that it was a particularly weak one. In the circumstances, the balance of convenience favoured the defender and the interim interdict should be recalled.
[17] Mr Kinroy submitted that the words in the codicil were precatory and not imperative; he referred to Wilson and Duncan on Trusts, Trustees and Executors (2nd ed. Paragraphs 2.13 to 2.15, a passage also cited by Mr Sandison). Even if it could be said that the testator intended the words to take effect as a condition attached to the gift of the residue of the estate, they were void from uncertainty or impossible of performance, and so of no effect. Alternatively, they were repugnant to the gift and so of no effect. In any event, the words concerned any development of the estate while in the ownership of the defender and not after that. They were not intended to take effect as a bar on the sale of the estate or as requiring a sale by the defender subject to conditions to secure to the pursuers any profit to be made out of the future development of any part of the estate. It was entirely unclear how a right in rem of the nature contended for by the pursuers could be made effective against the land in all time coming to the extent that it would bind singular successors many stages down the line and would enure to the advantage of future generations of the pursuers’ family forever.
[18] As to the balance of convenience, the defender had acted in good faith throughout his ownership and was doing so in relation to the proposed sale. It was, said Mr Kinroy, important to note that the defender had respected the wishes and intentions of his late father as these were set out in the will and codicil. As directed by the testator, the defender had used his best endeavours to drive forward both of the potential development sites referred to in the will. The Den of Leggart development had gone ahead and had come to fruition. The defender had seen to it that the profits from that development were shared four ways in the percentages specified in clause fourth (one) of the will. The development of the estate (referred to as the Banchory and Leggart development) had not, however, proceeded as had been hoped. The possibility of a new town being developed on the estate had been known to the testator and steps had been taken to obtain suitable planning permission. The testator had engaged the services of a company known as Edinmore Trading Limited (“Edinmore”) in relation to both of the prospective developments. Edinmore’s work was ongoing at the time of the testator’s death. When he had used the words “any development granted permission on any part of the estate” in the codicil the testator had clearly been referring to the work on which Edinmore was engaged. Had planning consent been obtained, the sale price for the estate would have been high. Subsequent to the testator’s death it had become clear that there was no prospect of the new town being developed on the estate. Planning permission was instead granted for a competing site. Edinmore’s interest in the land was accordingly brought to an end. There was now no realistic prospect of development of the estate during the lifetimes of the parties.
[19] Mr Kinroy submitted that there would be no difficulty in valuing any future development profits. In the circumstances, damages would be an adequate remedy for any loss the pursuers might sustain. In any event, the pursuers had unreasonably delayed in applying for interim interdict. They had been separately represented during the winding up of the testator’s executry. The first pursuer had been party as an executor to the disposition in favour of the defender. The pursuers have been aware since at least early December 2015 that the defender was seeking to sell the estate. They could and should have raised proceedings much sooner. They defender is now bound by the missives he has entered into. The date of entry is expected to be on or about 15 April 2016, although I understood that this would be subject to the occurrence of certain events, the details of which were not made known to me. The price agreed makes no allowance for any development or hope value. The estate has been sold at agricultural land value only. The defender contended that if interim interdict was granted he would suffer considerable loss. The sale of the property might fall through with the purchaser claiming damages for breach of contract from the defender or the purchaser might sue for implement of the missives.
Pursuers' reply
[20] In a brief reply Mr Sandison reiterated that it would be possible to devise arrangements to ensure that the pursuers’ rights to share in any development profits were safeguarded for the future. By way of example, the defender’s personal obligation could be secured over the estate by a standard security. A purchaser could be required to accept the obligation as provided for under the codicil and to impose the same obligation on any future purchaser. A standard security in respect of the personal obligation could remain in force until development took place; the title would be burdened to that extent.
Decision
[21] It would, of course, be inappropriate for me to attempt to reach a concluded view at this stage of the case on any of the issues of law raised in the summons or at the hearing. Instead, I have to make a preliminary evaluation of the strength of the pursuer’s pleaded case (as supplemented in oral argument) and decide, in the light of that prima facie assessment, whether it is more convenient to grant interim interdict or to withhold it.
[22] In my opinion, the pursuers’ averments and submissions disclose at best a weak prima facie case.
[23] Looking at the context in which the will and codicil were executed, it seems clear that at the material time the testator would have had two potential developments in contemplation: the Den of Leggart scheme, which duly went ahead, and the Banchory and Leggart scheme, which did not. This view of matters is supported by the terms of the direction at the end of clause (fourth) whereby the testator stipulated that the defender was to drive both (my emphasis) development sites forward in a proactive way and that he was to be remunerated by the executry for his efforts in so doing. Having regard to the provisions expressly made in the first exception in clause (fourth) concerning the four way division of the potential development site at Den of Leggart, it is reasonable to infer that the testator’s intention in the codicil was to ensure that he made suitable provision to deal also with the division of development gains from the other potential development site, namely the estate. As I have explained, work was underway to progress that second development at the time the testator made the will and the codicil; there was the possibility of a new town being approved on the site and a company (Edinmore) had been engaged to take matters forward. It seems to me to be reasonable to infer that this would have been the project that the testator had in view at the point when he wrote the codicil. The pursuers’ contention is that the testator's intentions, as reflected in the codicil, extended far beyond this so as to encompass any development carried out at any time in the future by anyone who might come to own the estate. They say that the codicil should be read as requiring the defender to ensure that the pursuers' rights to development profits are guaranteed in all time coming by the imposition of a burden on the title to the estate. In my view, this is not a realistic reading of the language in the codicil when it is properly understood in its true context. I find it impossible to spell out such a far-reaching obligation from the sparse language used in the codicil. Despite all that Mr Sandison said on the point, it is not easy to see how such an obligation could be made to work and its precise terms and reach are difficult to pin down. What exactly would be covered by development gains or profits, for example? Moreover, the requirement to impose such an unusual and onerous burden on the estate would have the potential to sterilise or blight the land by making it difficult to dispose of; prospective purchasers would be reluctant to accept an obligation to impose a burden of this kind on their successors in title. It seems to me to be unlikely that the testator would have wished to make the estate difficult to sell in the event that the defender considered it necessary to take this step.
[24] On a prima facie view of the key question of interpretation, I consider that the effect of the codicil read with the will was to require the defender to drive forward both development schemes to the best of his abilities and to share any profits from the two contemplated developments in the shares specified by his late father. There is no suggestion that the defender has not been faithful to these directions. I am unable to read the codicil as creating an entitlement in perpetuity for the pursuers and all of their descendants to share in the fruits of any development that might ever come to be carried out on the estate. I am equally unable to hold that the codicil imposed an obligation on the defender to ensure that the estate was forever to be burdened with a liability to pay development profits to the pursuers and their descendants. It follows that the pursuers' prima facie case is a weak one. It does not, in my opinion, provide a convincing or even an arguable basis for granting interim interdict.
[25] I would add that I consider that the pursuers have, in any event, delayed unreasonably in applying for interim interdict. From the correspondence produced it is clear that as long ago as early December 2015 both pursuers were well aware that the defender was anxious to sell the estate and that he was actively making arrangements to do so. The letter of 9 December 2015 from Shepherd and Wedderburn to Blackadders expressed the first pursuer’s concern that the defender was pressing ahead with an off-market sale in defiance of what were said to be the pursuers’ interests. By letter of 2 December 2015 Mr Robertson informed the second pursuer that the defender was in negotiations with a purchaser to sell the estate. In my view, it would have been reasonable for the pursuers to have sought interim interdict at a far earlier stage. They could and should have done so long before the date when the defender concluded missives. I am not impressed by the reliance placed by Mr Sandison on the complaint to the SLCC. That cannot be regarded as some sort of substitute for litigation in a matter that is apparently of such importance to the pursuers. The SLCC has no power to prevent a sale of the estate. I bear in mind also that the pursuers can, if they consider it appropriate so to do, bring proceedings against the executors for breach of trust. They may be able to sue for damages. So there are other remedies available to the pursuers. In this connection, it is well-known that suitably qualified persons can place a value on the prospects of land being developed in the future.
[26] In the whole circumstances, I am not persuaded that the balance of convenience favours the grant of interim interdict. In my opinion, it would be disproportionate at this stage for the court to pronounce an order that would have the effect of disrupting the contractual arrangements the defender has entered into. I shall accordingly recall the interim interdict granted by the interlocutor of 5 April 2016. I will reserve all questions as to expenses.